How Low Can They Go?

By Christopher Crown

August 11, 2017 5 min read

Haggling down a price can be very uncomfortable and unsuccessful without the proper tools. But learning the tricks could save you thousands of dollars on a new or used car. With this information on the inner workings of car dealerships and profit margins, as well as negotiation tips, you can walk into your next car-buying experience with confidence.

Getting the input of those on the other side of the table is extremely helpful for knowing what works and what doesn't. Kristin Wong of MentalFloss, a website that offers a wide array of life/time/money hacks, interviewed several dealership insiders about how to haggle to get down to a reasonable price. When deciding to sell or trade in your used vehicle, Anthony Curren of Rick Curren Auto Sales recommends selling your oldie outright. Many dealerships will significantly lowball your trade-in value when taking the price off a new car, and some new dealerships will even be sneaky about where the money comes from. Even if they accept a figure near the price you want, they might tag on additional costs somewhere else in the paperwork to recoup the expenditure on your old car. Reduce potential failure points in your transaction by trying to sell it yourself first.

When negotiating a better price, get a quote based on the profit margin, not a specific vehicle in the lot. In the same article, Mike Rabkin, founder of the company From Car to Finish and a professional negotiator with more than 23 years of experience, encourages going into the lot knowing what cars you want to consider, as well as those vehicles' MSRPs. (MSRP stands for manufacturer's suggested retail price.) This way, you can cut through the numerous salesperson transactions that elevate price based on car features and ask for a discount on the amount the dealer actually paid for the vehicle. As the old negotiating adage goes, "whoever speaks first loses." This straightforward approach makes the salesperson give the first offer and define the initial parameters, so you can haggle down from there.

Many buyers will successfully haggle prices down and then run into the standard salesperson line: "We've lowered this down as far as I can go. We're only making a few hundred dollars in profit now." In a recent article on the Axleaddict website, the writer researched how much money dealerships might still be making even after they have convinced you that you are getting the best deal possible. It turns out that many dealerships will get a rebate of a couple thousand dollars for selling a new vehicle, as well as a four-figure cash incentive. They also charge a dealer fee. This is all on top of the MSRP, which is usually significantly higher than the invoice price (what the dealership paid for the car). So, whenever it seems you are at the limit of your haggling, remember that the dealers are still making a large profit.

Now that you know the backstage workings of dealerships, you need some helpful negotiating techniques to ensure that you are fully equipped to walk into the dealer and name your price. The president of Spork Marketing, Jason Lancaster, recommends using timing to optimize the price of your sale. Dealers have good days and bad days and monthly quotas, so use these factors to your advantage. He suggests following up with a dealership on Saturday or Sunday nights near closing time to pressure the salesperson into giving a better deal. If your offer is doable, the opportunity to close one more deal by the end of the day might be tempting enough to get them to work with you. He also recommends buying at the end of the month when dealers might be just under their monthly quota.

Additionally, Lancaster suggests following up on a price on days that have terrible weather. These days can dramatically affect sales, so salespeople will be encouraged to lock down what few sales they can, even if they have to go down in price. Finally, name your ideal price (based on research) and let the salesperson know you will sign the paperwork immediately once the price comes down. This saves negotiating time and lets them know they are dealing with an informed buyer.

Your car is one of the most expensive things you can buy. We work hard for our money, so we have the right to reduce costs whenever possible. Next time you buy a new or used car, exercise that right with less stress and more skill.

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